NEW YORK, March 13 (Reuters) - U.S. stocks edged lower on Thursday as earlier gains spurred by better-than-expected data on retail sales and the labor market were offset by worries over Ukraine and the health of China's economy.

Weekly initial jobless claims fell 9,000 to a seasonally adjusted 315,000, marking a fresh three-month low and better than the forecast 330,000 new claims. Retail sales for February rose 0.3 percent, slightly more than the 0.2 percent estimated and ending two straight months of declines, although the prior month was revised lower.

In addition, import prices increased 0.9 percent last month, the biggest rise since February last year, with little sign of a broad pick-up in imported inflation.

Investors have discounted many economic numbers that have fallen short of expectations recently, attributing the weakness to a harsh winter across much of the country. Economic activity, evidenced by such data as retail sales, is expected to improve as the weather warms.

Still, with the benchmark S&P index near record highs, investors may be looking for evidence of stronger economic progress to justify further gains.

"You look at the retail sales today and they are not ideally what they would be but we can still kind of blame that on the weather," said Brad McMillan, chief investment officer of Commonwealth Financial in Waltham, Massachusetts.

"It's not that things are terrible, it's just it is not going to be as good as everybody thinks it is right now and that is the adjustment we are making."

China's economy slowed markedly in the first two months of the year, as growth in investment, retail sales and factory output all fell to multi-year lows.

Tensions in Ukraine continued to flare. Germany's Angela Merkel warned Moscow it risked "massive" political and economic damage if it refused to change course on Ukraine, saying Western leaders were ready to impose sanctions on Russia if necessary.

Russia said it had started military exercises near the border with Ukraine, in what is likely to be seen as a show of force in the standoff with the West over the Crimea peninsula.

"You've got the economic consequences to Russia and other emerging markets coming along. A lot of the risk reduction in Europe was based on the fact things are steady there and that is being called into question," said McMillan.

The Dow Jones industrial average fell 68.75 points, or 0.42 percent, to 16,271.33, the S&P 500 lost 5.92 points, or 0.32 percent, to 1,862.28 and the Nasdaq Composite dropped 18.303 points, or 0.42 percent, to 4,305.028.

In the last piece of economic data on Thursday, business inventories rose 0.4 percent, in line with expectations, but a drop in sales meant it was now taking the longest time since late 2009 to move goods from shelves.

Amazon.com Inc rose 2.5 percent to $380 as the best performer on the S&P 500 after the Internet retailer told customers on Thursday that the annual membership fee for its Prime shipping and media streaming service would go up to $99 from $79 next week.

Dollar General Corp lost 2.8 percent to $57.63 after the discount retailer posted lower-than-expected sales for the holiday quarter.

Venaxis Inc surged 25 percent to $3.39 after the company said its appendicitis test correctly predicted results in 97 percent of patients in a clinical trial.